A S No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 1 Buy Call

C Type of Option

D Explanation

F Profitable(stock price movement)

In the Money At the Money Out of the Money In the Money At the Money Out of the Money

2 Sell

3 Covered Call writing 4 Covered Sell writing 5 Option Strategies Stock price increasing you protect it buying a put with Strike Price(SP) < stock and selling call with SP > stock

15 16

Collar

17 18 19

Repair

Stock price is down so buy a call where SP = current stock price and sell a call with SP > current stock price

Leaps(Long term equity anti pation security) 20 21 22 6 7 Delta

Long term options 1-3 yrs in time only most widely traded stocks have LEAP options Options moves delta times the underlting stock

G Adv./Disadv. 1 2 3 4 5 6 7 8 9 10 11 12 13 14

H Time Value

I Intrinsic Value

Break even Maximum Gains

Lowers Insurance cost(better than buying just put), reduces risk and protects profits,removes downside risk and allows upside 15 potential 16 Stock is down 20-30% and want to breakeven or make small profit, reduce paper loss without 17 expense 18 19

Greater time, frees up capital for 20 LEAPS diversification, leverage 21 22

L Maximum Loss 1 2 3 4 5 6 7 8 9 10 11 12 13 14

15 16

17 18 19

20 21 22

BUY Bullish - you want the stock price to go up

SELL Bearish - you want the stock price to go down

CALL

PUT

Bearish - you want the Bullish - you want the stock price to go down stock price to go up

Debit Spreads - Formulae Call Total Debit (TD) Sell Pr - Buy Pr Maximum gain Max loss Break even (SP1-SP2) - TD Sell Pr - Call Pr Long(Buy) SP + TD

Put Sell Pr - Buy Pre (SP1-SP2) - TD Sell Pr - Call Pr Long(Buy) SP -TD

Credit Spreads - Formulae Call Total Credit (TC) Sell Pr - Buy Pr Maximum gain Max loss Break even Total Credit (SP1-SP2)-TC Short(Sell)+TC

Put Sell Pr - Buy Pr Total Credit (SP1-SP2)-TC Short(Sell)-TC

S No 1 Buy Call

Type of Option In the Money At the Money Out of the Money

Explanation

Profitable(stock price movement)

Buy PUT In the money At the money Out of the money 2 Sell CALL In the Money At the Money Out of the Money Sell PUT In the money At the money Out of the money 3 Covered Call writing 4 Covered Sell writing 5 Option Strategies

Collar

Stock price increasing you protect it buying a put with Strike Price(SP) < stock and selling call with SP > stock Stock price is down so buy a call where SP = current stock price and sell a call with SP > current stock price

Repair

Leaps(Long term equity anti pation security) 6 7 Delta

Long term options 1-3 yrs in time only most widely traded stocks have LEAP options Options moves delta times the underlting stock

8 Index Options

Options traded on the index like S&P 100/500 OEX - S&p 100, SPX - S&P 500 etc Works the same as stock call option

Buy CALL In the money At the money Out of the money Buy PUT In the money At the money Out of the money

INDEX OPTION - TYPES type 1 STRADDLE Debit Credit 2 STRANGLE Debit Credit 3 SPREADS Debit Bull call spread Vertical Bear put spread Credit Debit Credit Bull put spread Bear call spread

purchased/sold

Long Call SP < Stock Price < Short Call SP Short Put SP < Stock Price < Long Put SP Buy Put SP < Stock Price < Sell put SP Sell call SP < Stock Price < buy call SP

3 SPREADS Vertical

Adv./Disadv.

Time Value

Intrinsic Value

Break even

Maximum Maximum Gains Loss

Lowers Insurance cost(better than buying just put), reduces risk and protects profits,removes downside risk and allows upside potential Stock is down 20-30% and want to breakeven or make small profit, reduce paper loss without expense

Greater time, frees up capital for LEAPS diversification, leverage

Read margins later

SP < Stock Price < Short Call SP t SP < Stock Price < Long Put SP

moderate rise in stock price moderate fall in stock price moderate rise in stock price moderate fall in stock price

SP < Stock Price < Sell put SP P < Stock Price < buy call SP

why options enhance portfolio,provides flexibility,opportunities in bull,bear and neutral markets Option Tradings - OMEX etc OCC regulates all option trading Buy Call - right to buy @ specific time within specifed period of the time Buy Put - right to sell @ specific time within specifed period of the time right purchased from seller of the premium Type - call /put strike price premium Sell Call - obigated to buy from the buyer at the specified time within the specified time Sell Put - obligated to sell to the buyer at the specified time within the specified time option exercise process expiration exercise option one of 3 expiration cycle exercising - notice to occ before cut off time CALL stock @ 10 Time Value Intrinsic value Premium In the money (8) 3 2 5 Out of the money (15) 3 0 3 At the money (10) 4 0 4 PUT stock @ 10 In the money (12) Out of the money (8) At the money (10) Time Value 2 2 1 Intrinsic value 2 0 0 Premium 4 2 1